4 Platinum Co. has approached Gold Co. with an offer to buy 85% of the outstanding shares of Gold Co. for $690,000 cash. The 5 offer is accepted and control is transferred over at the end of the day on Dec 31, 2020. Platinum Co. uses the FVE method and 5 accounts for its investments using the cost method. 7. Presented below are the balance sheets of both companies before the acquisition, as well as the carrying values vs. fair values 3 of the net assets of Gold Co.. 2 0 31-Dec-20 1 Balance Sheet Balance Sheet 2 Before Acquisition Before Acquisition 3 Platinum Co. Gold Co. Gold Co. 4 Current Assets Carrying Value Carrying Value Fair Value 5 Cash 700,000 15,000 15,000 6 Accounts receivable 20,000 250,000 230,000 7 Inventory 800,000 800,000 8 Total Current Assets 720,000 1,065,000 9 Long-term Assets 0 Machinery 475,000 353,000 1 Acc. depreciation, Machinery (122,000) 2 Machinery, 353,0 3 Long-term investments 1,500,000 4 Total Long-term Assets 1,500,000 353,000 5 Total Assets 2,220,000 1,418,000 6 350,000 450,000 220,000 100,000 320,000 350,000 800,000 800,000 7 Current Liabilities 3 Accounts payable Bank loan - current Total Current Liabilities i Long-term Liabilities 2 Shareholder loan B Bank loan - long term 1 Total Long-term Liabilities 5 Equity 5 Common shares 7 Retained earnings 3 Total Equity 2 Total Liabilities and Equity 700,000 700,000 800,000 100 1,199,900 1,200,000 2,220,000 100 267,900 268,000 1,418,000 Check 1 2 3 7 Required: 5 1) 52) 7 3) 3 2 Prepare the journal entries for the acquirer and the acquiree upon acquisition. Calculate goodwill using the FVE method. Prepare the consolidated balance sheet starting with the separate entity balance sheets and showing all the elimination entries. /1 /2 /9 4 Platinum Co. has approached Gold Co. with an offer to buy 85% of the outstanding shares of Gold Co. for $690,000 cash. The 5 offer is accepted and control is transferred over at the end of the day on Dec 31, 2020. Platinum Co. uses the FVE method and 5 accounts for its investments using the cost method. 7. Presented below are the balance sheets of both companies before the acquisition, as well as the carrying values vs. fair values 3 of the net assets of Gold Co.. 2 0 31-Dec-20 1 Balance Sheet Balance Sheet 2 Before Acquisition Before Acquisition 3 Platinum Co. Gold Co. Gold Co. 4 Current Assets Carrying Value Carrying Value Fair Value 5 Cash 700,000 15,000 15,000 6 Accounts receivable 20,000 250,000 230,000 7 Inventory 800,000 800,000 8 Total Current Assets 720,000 1,065,000 9 Long-term Assets 0 Machinery 475,000 353,000 1 Acc. depreciation, Machinery (122,000) 2 Machinery, 353,0 3 Long-term investments 1,500,000 4 Total Long-term Assets 1,500,000 353,000 5 Total Assets 2,220,000 1,418,000 6 350,000 450,000 220,000 100,000 320,000 350,000 800,000 800,000 7 Current Liabilities 3 Accounts payable Bank loan - current Total Current Liabilities i Long-term Liabilities 2 Shareholder loan B Bank loan - long term 1 Total Long-term Liabilities 5 Equity 5 Common shares 7 Retained earnings 3 Total Equity 2 Total Liabilities and Equity 700,000 700,000 800,000 100 1,199,900 1,200,000 2,220,000 100 267,900 268,000 1,418,000 Check 1 2 3 7 Required: 5 1) 52) 7 3) 3 2 Prepare the journal entries for the acquirer and the acquiree upon acquisition. Calculate goodwill using the FVE method. Prepare the consolidated balance sheet starting with the separate entity balance sheets and showing all the elimination entries. /1 /2 /9